They, however, called for close monitoring of the implementation of the budget, saying this was what mattered most.

Specifically, experts commended the reduction in the share of the recurrent expenditure, increased focus on agriculture and women, and the incentives to some sectors of the economy. They, however, faulted the proposed oil output of 2.63 million barrel per day, low allocation to health sector, reliance on borrowing to finance the budget, and the lack of accountability in the implementation of the budget for 2011.

On its parts, NMA lamented exclusion of the health sector from the tax relief announced by the President.

Mr. Goodie Ibru,OON, President, Lagos Chamber of Commerce and Industry (LCCI), said: “Generally, these assumptions are realistic and sustainable. However, the oil production assumption is on the optimistic side, as crude oil theft and vandalisation of pipelines in the oil producing areas have not abated. The expenditure outlay in the budget is N4.92 trillion. At this stage, it is difficult to undertake a thorough analysis of budgetary appropriations as the full details are yet to be released.

“But from the expenditure proposals, it is evident that allocations to infrastructure development and some other critical sectors of the economy are grossly inadequate. The government needs to do a lot more in the areas of power, the roads and agriculture. It is important to also note that this allocation is a combination of both recurrent and capital, which implies that the capital content is even much lower.

2013 budget chart

“We note the 2.7 per cent reduction in recurrent expenditure from 71.43 per cent to 68.7 per cent; and the increase of 2.8 per cent in capital budget, from 28.5 per cent to 31.3 per cent. These adjustments are not profound enough to provide the needed infrastructural support to stimulate the economy.

“The country’s debt profile remains a major source of concern. We are concerned about the growing level of domestic debt and the high cost of debt servicing. Domestic borrowing is proposed to reduce from N747 billion in 2012 to N727 billion in 2013, a mere 2.3 per cent reduction. A staggering N591.76 billion is earmarked for debt servicing.

“However, the provision of N100 billion sinking fund for the repayment of maturing debt obligations is a welcome development. We commend these measures as they could boost domestic production, conserve foreign exchange and create jobs.

“However, the imposition of 100 per cent levy on rice which is a staple food may have some unintended consequences if there is no adequate supply side response on the domestic front. We have to be sure that domestic capacity to grow and process rice has been put in place, otherwise, we face the following risks: Drastic increase in the price of rice which would result in escalation of poverty; escalation of smuggling and corruption at the ports; pressure on government for waivers of duty; diversion of cargoes to neighbouring countries, thus denying the maritime sector of jobs and revenue.
“For the avoidance of doubt, the Lagos Chamber of Commerce and Industry is in full support of the self-reliance aspirations in food production. But for such a policy to be sustainable, there should be a deliberate policy and practical steps to build capacity to fill the demand-supply gap that would be created. Otherwise, the citizens will be further impoverished. The implications of the recent flood disaster on food security are also a factor to take into account.

Razia Khan, Regional Head of Research, Africa, for Standard Chartered Bank said the budget is an encouraging sign of the weight currently given to reforms in Nigeria. Specifically, she noted that though there was an increase in total expenditure by five per cent, the increase was relatively modest, and compares favourably with the magnitude of spending increase that we had seen in 2010.

In real terms, it signals the ongoing attempt to achieve fiscal consolidation. This is also reflected in the budget deficit, which falls to a projected 2.17 per cent of GDP, from an estimated 2.85 per cent in 2012, largely as already indicated.
She said the decline in the share of recurrent expenditure to 68.7 per cent of the budget “is a further step in the right direction, and indicative of the authorities’ desire to gradually boost the share of capital expenditure, providing a firmer platform for future growth.”

Khan, who is the Regional Head of Research, Africa, for Standard Chartered Bank, also commended the $75 per barrel oil price benchmark, but warned against any attempt to increase the benchmark.

She said: “Of greater concern is the suggestion that there might be an attempt by the House to raise this to USD 80/bbl. In our view, given global risks, and Nigeria’s ongoing fiscal and export dependency on a single commodity, the priority for Nigeria has got to be increasing its rate of saving. Were oil prices to fall, Nigeria would currently be left very vulnerable, with no sound mechanism for being able to smooth spending, let alone provide a counter-cyclical boost to the economy.

“The Sovereign Wealth Fund, while encouraging, is not yet sizeable enough to create a sound buffer against external shocks. It cannot be assumed either that the debt markets currently comfortably open to Nigeria, would be unaffected by any fall in the oil price. There is, therefore, a need for much more fiscal conservatism, and the signals from the House are a considerable concern. Khan, however, expressed concern on the budgeted oil output of 2.63 million barrel per day. She said “Also a concern is the slow creep up in the budgeted oil output, which now rises to 2.53mn bpd from 2.48mn bpd.

“This measure has risen consistently year after year recently, with no real visibility on whether Nigeria has seen the investment that allows it to comfortably commit to greater output levels. Yes, some official data appears to indicate that Nigeria is currently producing near an all-time highs. But there are such vast disparities in different estimates, and so many gaping holes in measures of Nigeria’s oil output, that the continued rise in Nigeria’s budgeted output assumptions, at a time when investment in the sector has been dwindling, does not inspire great confidence.”

Samuel Durojaye, President, Finance Houses Association of Nigeria (FHAN): “It is not really what is proposed that matters but what is implemented. The budget has deficit which is to be financed by additional borrowing from the public. Already, there are concerns about government borrowing crowding out the private sector of loanable funds, even the Minister for Finance, Dr. Ngozi Okonjo-Iweala expressed this concern, saying we should find a way to reduce government borrowing.

That is why the National Assembly is proposing that the oil price benchmark should be increased to $80 per barrel.

“What the Federal Government needs to do to reduce spending and borrowing is to reduce bureaucratic expenses. We should cut overhead expenses of political office holders by 20 per cent, by reducing the retinue of aides and advisers. The National Assembly too should reduce its overhead expenses but they don’t want to do that. We need to sit down as a nation and see how we can reduce expenses. There is so much money in the political space and we need to reduce it.

Former Minister of Finance, Chief Olu Falae, also commended the reduction in the share of the recurrent expenditure but called for accountability in the implementation of the capital expenditure. He said:“In a long while we can see a change where there is a reduction in the recurrent and an increase in the capital expenditure. The increase in the capital expenditure is quite significant. This is good. Although the majority of the budget is on recurrent expenditure, a reduction of it from the previous years will cut government’s expenses.

“When a substantial amount is devoted to capital expenditure which is an increase from the previous years, economic growth can be attained. I hope that the capital expenditure will be used well. The budget is good on paper and we hope that the capital expenditure will be disbursed in good terms.

“Capital projects will always be to the advantage of Nigerians, it will add value in the long run. I hope that the mix of the capital expenditure will be adequately channelled to the appropriate sector and will be accounted for because one of the problems we have in this country is accountability. We all hope that the stealing will be minimized, this is very important.”